Myth- you must have a credit card or take out a loan in order to build your credit.
answer
Truth- you don't need a credit rating in order to function financially.
question
Myth - a loan to a friend or relative is a way of helping them.
answer
Truth- lending money to others will cause the relationship to be strained or destroyed.
question
Myth- by co-signing a loan, you are helping a friend or relative.
answer
Truth- you may have to pay back the loan yourself or risk having your credit ruined.
question
Myth- cash advance, payday, lending, rent-to-own, and title pawning are all financial services for lower income people.
answer
Truth- these are loan sharks that benefit no one but the owners of these companies.
question
Myth- the lottery and other forms of gambling will make you rich.
answer
Truth- the lottery is a tax on the poor and is not a reliable way to build wealth.
question
Cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan.
answer
Annual Percentage Rate
question
A decrease or loss in value.
answer
Depreciation
question
A detailed report of an individual's credit history.
answer
Credit Report
question
Time frame that a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated for another term.
answer
Loan Term
question
Type of card issued by a bank that allows users to finance a purchase.
answer
Credit Card
question
A measure of an individual's credit risk; calculated from a credit report using a standardized formula.
answer
Credit Score
question
A yearly fee that's charged by the credit card company for the convenience of the credit card.
answer
Annual Fee
question
Preferred method of debt payment; includes a list of all debts organized from smallest to largest balance; minimum payments are made to all debts except for the smallest, which is attacked with the largest possible payments.
answer
Debt Snowball
question
You must establish credit in order to buy a house.
answer
False
question
If you are a victim of identity theft, you are only responsible for paying back half of the debt.
answer
False
question
Which of the following is not a factor in determining a FICO score?
answer
Paying cash for all purchases
question
Which of the following is not a good idea for getting out of debt?
answer
Borrow money from your parents to pay off the debt
question
Which of the following things cannot be done with a debit card but can be done with a credit card?
answer
Go into debt
question
Why is an adjustable rate mortgage (ARM) a bad idea?
answer
An ARM is a mortgage with an interest rate that changes based on market conditions. They are not recommended since there is increased risk of losing your home if your rate adjusts higher, and if you lose your job, your payment can become too much for you to afford.
question
Explain why financing a car is a bad idea.
answer
Spreading the purchase of a car over four or five years hinders your ability to pay off debt or save money during that time; you will be paying interest in addition to the purchase price; the car depreciates quickly which means you may end up owning more on the car than it's worth.
question
Describe the negative consequences of taking on debt. What effects can debt have on your future?
answer
Constantly owing money to others prevents you from paying yourself through saving and investing, making it difficult or even impossible to build wealth over time.
question
What are some things you can do to protect your personal information?
answer
Use a paper shredder and destroy credit card offer and other documents with personal information, check your credit report annually, create strong passwords and keep them confidential, purchase identity theft protection, never give out your social security number unless absolutely necessary.
question
Explain how debt snowball works.
answer
Put all your debts in order from smallest to largest; pay minimum payments on all your debts except for the smallest one; attack the smallest debt with intensity until it is paid off; appy the paid off debt's payment to the next debt on the list continuing to "snowball" payments toward each larger debt.
Myth- you must have a credit card or take out a loan in order to build your credit.
answer
Truth- you don't need a credit rating in order to function financially.
question
Myth - a loan to a friend or relative is a way of helping them.
answer
Truth- lending money to others will cause the relationship to be strained or destroyed.
question
Myth- by co-signing a loan, you are helping a friend or relative.
answer
Truth- you may have to pay back the loan yourself or risk having your credit ruined.
question
Myth- cash advance, payday, lending, rent-to-own, and title pawning are all financial services for lower income people.
answer
Truth- these are loan sharks that benefit no one but the owners of these companies.
question
Myth- the lottery and other forms of gambling will make you rich.
answer
Truth- the lottery is a tax on the poor and is not a reliable way to build wealth.
question
Cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan.
answer
Annual Percentage Rate
question
A decrease or loss in value.
answer
Depreciation
question
A detailed report of an individual's credit history.
answer
Credit Report
question
Time frame that a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated for another term.
answer
Loan Term
question
Type of card issued by a bank that allows users to finance a purchase.
answer
Credit Card
question
A measure of an individual's credit risk; calculated from a credit report using a standardized formula.
answer
Credit Score
question
A yearly fee that's charged by the credit card company for the convenience of the credit card.
answer
Annual Fee
question
Preferred method of debt payment; includes a list of all debts organized from smallest to largest balance; minimum payments are made to all debts except for the smallest, which is attacked with the largest possible payments.
answer
Debt Snowball
question
You must establish credit in order to buy a house.
answer
False
question
If you are a victim of identity theft, you are only responsible for paying back half of the debt.
answer
False
question
Which of the following is not a factor in determining a FICO score?
answer
Paying cash for all purchases
question
Which of the following is not a good idea for getting out of debt?
answer
Borrow money from your parents to pay off the debt
question
Which of the following things cannot be done with a debit card but can be done with a credit card?
answer
Go into debt
question
Why is an adjustable rate mortgage (ARM) a bad idea?
answer
An ARM is a mortgage with an interest rate that changes based on market conditions. They are not recommended since there is increased risk of losing your home if your rate adjusts higher, and if you lose your job, your payment can become too much for you to afford.
question
Explain why financing a car is a bad idea.
answer
Spreading the purchase of a car over four or five years hinders your ability to pay off debt or save money during that time; you will be paying interest in addition to the purchase price; the car depreciates quickly which means you may end up owning more on the car than it's worth.
question
Describe the negative consequences of taking on debt. What effects can debt have on your future?
answer
Constantly owing money to others prevents you from paying yourself through saving and investing, making it difficult or even impossible to build wealth over time.
question
What are some things you can do to protect your personal information?
answer
Use a paper shredder and destroy credit card offer and other documents with personal information, check your credit report annually, create strong passwords and keep them confidential, purchase identity theft protection, never give out your social security number unless absolutely necessary.
question
Explain how debt snowball works.
answer
Put all your debts in order from smallest to largest; pay minimum payments on all your debts except for the smallest one; attack the smallest debt with intensity until it is paid off; appy the paid off debt's payment to the next debt on the list continuing to "snowball" payments toward each larger debt.
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